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Hi,
I have a question relating to the calculation of planning and operational variances.
For example: Making a product
Budget: Material cost 4$ per kg
Revised: Material cost 4.5$ per kg but required 1.2 kg per unit
Actual: Material cost 4.7$ per kg and required 1.5 kg per unit.
How the material price planning and operational variance will be calculated?
Is it planning = 1.2kg *(4.5-4$) and operational = 1.5kg * (4.7-4.5)
Thank youAs I explain in my free lectures on this, there are two different ways of doing this that give different answers. Both ways have a logic and both ways are given full marks by the examiner.
The way you have done it is the way the current examiner prefers and is the way I explain in my free lectures.
I understand the way you have shown in the lectures. The problem is as I do Bpp kit or past exams when they calculate the planning price variance by using the actual usage * (actual price – standard price) since they provide no infor about the revised usage. My question is if we have information about revised usage then when we calculate planning variance, we should use the revised usage instead of actual usage. Is that correct?
How to calculate : Material Price Planning and operational variances and Material Usage Planning and Operational Variances in a question where two material used by the product. There is change in the quantity (mix) used and change (increase) in price due to shortage of material.
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